The Top 3 Reasons Not to Invest in 90% Junk Silver Coins

The Top 3 Reasons Not to Invest in 90% Junk Silver Coins

90% junk silver coins are a marvelous way to invest in physical silver bullion, but they do have a few major drawbacks that silver stackers and investors should know about.

 

1) Bags of 90% junk silver contain an unsettling percentage of slicks, culls, and dateless coins

 

One of the downsides of buying bags or rolls of constitutional junk silver is that you are dealing with circulated coins.  Not only are the coins circulated, but they are old as well.  In fact, it is common to find Mercury dimes, Standing Liberty quarters and Walking Liberty half dollars in junk silver bags.  These coins were all struck in the 1940s or earlier, making them as much as 100 years old.

And the longer a coin has circulated, the greater the chance it will be impaired in some way.  Now, junk silver is not sold as a numismatic investment, so we’re not looking for perfection here.  But there is a limit to what is acceptable at the same time.

Slick (excessively worn), dateless, holed or otherwise damaged coins often find their way into bags of junk silver sold by the major bullion dealers.  Indeed, these dealers have every incentive not to remove these culls from their bags.  Attempting to do so would not only increase labor costs, but also incur a replacement cost.

So it shouldn’t come as a surprise that a non-trivial percentage of junk silver bags are composed of these impaired silver coins.  I estimate that the typical bag of junk silver contains anywhere from 2% culls all the way up to 10% on the high end. 5% culls is a pretty reasonable average estimate, in my experience.

Now an argument can be made that this doesn’t matter in the grand scheme of things.  After all, circulated junk silver is the absolute cheapest way to buy fractional silver bullion.

In addition, these coins are spotted a wear allowance in the bullion industry.  Although every $1 face value of uncirculated 90% silver should theoretically contain 0.7234 troy ounces, circulated junk silver is assumed to contain just 0.7150 troy ounces – around a 1.2% wear allowance.

A lot of stackers who buy constitutional silver do so because they want to have purchasing power after a destabilizing geopolitical event, such as a natural disaster or economic crash.  In these situations it is assumed that U.S. junk silver will be widely accepted due to its convenient sizes and widespread recognition among the general public.

But how do you think it is going to look when you pull out your junk silver to buy food from a stranger and some of the coins are slicks?  If the other party to the transaction is smart enough to know the value of 90% silver coins, they are also smart enough to know that slick coins will come up light on a scale.

In other words, if you intend to use junk silver as a barter tool, any cull coins you receive in a bag of 90% silver are honestly pretty useless.  You won’t be able to easily pass them in a survival situation, which is the primary reason for buying them in the first place.

Now I do think this disadvantage can be mitigated, albeit with a little bit of extra work and money.  Simply put, you can screen and remove any cull coins from a roll or bag of junk silver you buy.

If you do purchase constitutional silver, I would recommend that you pull out anything holed, badly scratched, excessively dirty, dateless, or in a condition below Good-4 (when you start to lose full rims due to wear).  This will ensure that all the remaining coins retain good weight and eye appeal, which I feel will be imperative in a doomsday scenario.  The coins that you pull will be the junkiest of junk silver, and they can go straight into the smelter’s pot without a single pang of regret (once you check them for rare dates, of course).

 

U.S. 90% Junk Silver Coins for Sale on eBay

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2) Constitutional silver is bulkier than .999 fine bullion

 

Many stackers might find this to be an almost laughably minor drawback.  But it might not be so funny once your stack reaches a certain size.

Because junk silver is only 90% fine, you end up owning extra weight compared to an equal amount of .999 fine bars or coins.  In fact, you have to stack an extra 11% gross weight of constitutional silver to achieve the same number of ounces as .999 fine silver.

Your troubles don’t end there, though.  90% silver coins also have a slightly lower density (10.34 gm/cm3) than .999 fine silver (10.49 gm/cm3).  This means that 100 troy ounces of silver will theoretically occupy 296.8 cm3 if purchased in .999 fine form, compared to 334.3 cm3 if bought as junk silver.  So in the final analysis, constitutional silver will take up an additional 12.6% storage volume in your stack.

Now, depending on how you stack, this might be a non-issue.  If you intend to purchase less than 250 troy ounces of junk silver, or about $350 face value, then I don’t think you have anything to worry about.  But if you propose to accumulate many hundreds or even thousands of ounces of constitutional silver, it may contribute to long-term storage issues.

Secure storage space for silver enthusiasts is often at a premium, regardless of whether we are talking about a trusted bank safety deposit box, a stout residential safe or an ingenious home hiding spot.  Although it might not seem like a deal-breaker at first, the extra 12.6% volume required for constitutional silver could eventually prove to be a significant disadvantage versus .999 fine silver coins or bars.

 

.999 Fine Silver Bars for Sale on eBay

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3) Junk silver is slowly losing its benchmark status to the American Silver Eagle

 

From the late 1960s until the early 2000s, $100, $500 and $1,000 face value bags of junk silver were the preferred form of physical silver in the marketplace.  They were universally recognized by the public, completely trusted and readily available in almost any volume you might want or need.

Constitutional silver’s “king of the mountain” status reached its apogee in 1999 during the Y2K Crisis.  During this hysteria, many pundits believed a prevalent date bug in old computer code had the potential to crash our global civilization when the calendar flipped over to January 1, 2000.

Of course, it didn’t happen.  But many panicked investors stockpiled junk silver in anticipation of a possible Mad Max scenario, driving up premiums to more than 50% over spot.

Notice that they (mostly) didn’t buy Canadian Maple Leafs or American Silver Eagles or Sunshine Mint silver bars.  They bought U.S. junk silver.  And they bought it because it was the benchmark by which all other physical silver investments were measured.

But that benchmark status has steadily eroded over the last two decades.  At this point, I think there is equal, perhaps even better, recognizability of government issued silver bullion coins – particularly American Silver Eagles.

This inevitable passing of the torch isn’t really junk silver’s fault.  Every time the price of silver spiked in the past, tens of thousands of bags of 90% silver coins were shipped off to the refiners, never to be seen again.  This happened most notably during the Hunt Brother’s 1980 silver bubble (also referred to as the Great Melt) and more recently with the frothy precious metal market of 2011.  The melting of junk silver happened at other times too, just in smaller quantities.

The effect of all this melting is that there is simply less and less of the constitutional stuff around as time goes by.  The last circulating U.S. 90% silver coinage was minted over 50 years ago at this point.  They simply aren’t making anymore.  As a result, it is slowly getting harder and harder to find the huge numbers of bags that are required to drive institutional-scale liquidity.

The United States Mint has also done its part to accelerate this changing of the guard.  From the inception of the American Silver Eagle program in 1986 until the year 2000, the U.S. Mint struck a grand total of 81 million of the bullion pieces.  But since that time, 424 million of the perennially popular silver coins have been minted.  This, more than anything else, has helped to displace junk silver from its traditional role of silver bullion of first resort.

The next time a major financial crisis unfolds, I think it is a good bet that American Silver Eagles (and possibly other government-issued silver bullion coins) will be the must-have investments for those desperate to own physical silver.  This isn’t to say that junk silver won’t command a healthy premium, but I suspect it will be lower than the new king of the physical silver market.

 

Government-Issued Silver Bullion Coins for Sale on eBay

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Before you send me hate mail, I want to make it clear that despite the drawbacks I’ve listed above, I don’t dislike junk silver as an investment.  I’ve owned it in the past.  I own a bit now.  And I’ve seriously considered buying more as silver spot has lingered in the $15 to $16 an ounce range.

I feel that silver is a tremendously undervalued asset at the moment.  And in my opinion, anything that convinces you to protect your financial health by purchasing physical silver is a positive.  If that physical silver happens to come in the form of 90% constitutional silver, then I have no complaints.

 

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Georgian Sterling Silver Port Label From 1819

Georgian Sterling Silver Port Label From 1819
Photo Credit: 925pa

Georgian Sterling Silver Port Label From 1819

Buy It Now Price: $125 (price as of 2019; item no longer available)

Pros:

-This beautiful sterling silver Port label, or wine tag, originates from Georgian England where it was made by the silversmith Charles Rawlings in London in 1819.

-This early 19th century liquor tag measures approximately 1.9 inches (4.8 cm) long by 1.1 inches (2.8 cm) tall (excluding chain) and weighs a robust 21.7 grams (0.7 troy ounces).  The weight is notable because many wine tickets of the era only weigh half as much, making this specimen quite heavy in comparison.

-Port is a fortified, sweet red wine exported from Portugal – traditionally through the northern coastal city of Porto.  Although the history of Port wine dates back to the Middle Ages, it skyrocketed in popularity among British nobility in the 16th and 17th centuries.  By the time of the Georgian era in the late 18th to early 19th century, a wine cellar stocked with Port was de rigueur in any wealthy Londoner’s home.

-The Georgian period, which ran from 1714 to 1837, was a time of British ascendancy on the world stage.  The country’s longstanding rivalry with France ended in British victory in both the Seven Year’s War and the Napoleonic Wars.  British overseas holdings expanded during this era as well, with the glaring exception of the American colonies, which were lost in 1783.

-This Port label was made by Charles Rawlings, a London-based silversmith who worked from 1817 until the 1840s.  Charles Rawlings specialized in silver smalls, producing exceedingly fine liquor tags, snuff boxes and grape shears.  His snuff boxes, in particular, are quite coveted today.

-The hallmarks on this Port label are appropriate for the period, featuring the maker’s mark (CR), date letter (d), lion passant and sovereign’s head (George III).  The only mark that is missing is the leopard’s head, which was applied to articles hallmarked in London.  However, it isn’t too unusual to find small silver items from the Georgian era that omit the city hallmark.

-Georgian silver is dramatically undervalued in today’s antique marketplace.  I recently featured a set of 8 Georgian sterling forks in the King’s pattern that were selling for hardly more than their scrap value.  This antique silver Port label is a very similar bargain.

-At an asking price of only $125, this Georgian sterling silver Port label is ridiculously cheap.  Think about it – just a little more than a hundred dollars gets you a 200 year old wine ticket that was handmade from heavy gauge silver in an exquisite style.  The astute antique collector or investor lucky enough to buy this fine piece is all but assured of receiving a strong return on investment.

 

Cons:

-It is possible to buy more recent vintage British sterling liquor tags from the 1960s, 1970s and 1980s for perhaps half the price of this Port label.  I believe they are both great options and the choice between the two is simply up to the personal preference of the collector.

 

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MMT – The History of a Bad Monetary Idea

MMT - The History of a Bad Monetary Idea

MMT stands for Modern Monetary Theory – an economic philosophy on the lips of nearly every politician and economist today.  In short, MMT states that a sovereign government that controls its own currency is not constrained by its ability to issue debt.  It can simply cease issuing bonds and print money instead.  And, provided that it does not have foreign currency denominated debts or liabilities, a sovereign government can never run out of money.

In Modern Monetary Theory, the issuance of government bonds is completely unnecessary.  In fact, government debt is an artificial limitation on the obligation of the state to provide economic prosperity to its people.

Instead, proponents of MMT believe that the very act of government spending brings currency into existence.  This is both a good and necessary thing in their eyes because government spending becomes savings in the hands of the population.  Furthermore, as long as the government is receiving valuable goods and services in return for its freshly printed money, then no significant inflation will take place.  If inflation does start to take root, the government merely has to raise taxes, which has the effect of destroying currency and suppressing inflation.

The reason Modern Monetary Theory is so popular at the moment is because we’ve been slogging through a soft depression over the past decade.  I call it a soft depression because all the traditional economic indicators appear to be green: the stock market is up, GDP is up and the unemployment rate is down.  But it is a depression nonetheless.  Average people are feeling increasing economic distress while the global oligarchs and monopolists are becoming fabulously wealthy.

Is it any wonder that the middle class is desperate for some sort of alternative to the obvious failures of traditional economics?

The only problem is that MMT isn’t really a very new idea.  In fact, it is a very, very old idea – at least 300 years old by my count.  And it is a bad idea too.  Modern Monetary Theory is really just inflationism wrapped up in a fancy new package – all the better to trick the historically ignorant.

Want proof?  Let’s look back in time at episodes of MMT past.

The first major proponent of Modern Monetary Theory was John Law, an 18th century Scottish economist who later immigrated to France.  Of course, this description of the man is unrealistically kind.  In reality, he killed a man in a London duel and then fled to Continental Europe to avoid justice.  And John Law wasn’t so much an economist as a financial speculator, gambler and conman.

In fact, Law was such a good conman that he eventually duped the Duke of Orleans into letting him try to solve France’s economic troubles!  You see, in the early 18th century France was nearly bankrupt from fighting all the wars of the former king, Louis XIV.  The French state was nearly out of gold and silver coins and was desperately looking for a quick fix.

Enter John Law and his profoundly dangerous economic strategy.

Law believed that replacing gold and silver coinage with freshly printed paper money would spur business and increase the supply of credit.  He also planned to simultaneously extinguish the French national debt by swapping it out for shares in economic ventures.

The vague “economic ventures” mentioned above turned out to be the Mississippi Company, a firm that the French government granted a trade and mining monopoly to in the undeveloped territory of French Louisiana.

At first everything was great.  Freshly issued paper money (proto-MMT) hit the markets and commerce flourished.  And shares in the Mississippi Company skyrocketed in value, making investors rich.

Then reality hit.

Much like today’s Modern Monetary Theorists, John Law thought that if a little paper money was good, then a lot must be great.  The paper currency was over-issued and soon people began frantically trying to exchange their rapidly depreciating paper money for gold, silver and other real goods.  Mississippi Company shares didn’t fare any better.  After rising from 500 to 10,000 livres in value, shares of the Mississippi Company collapsed in 1720.

The Mississippi Bubble, as it came to be known, bankrupted France far more thoroughly than Louis XIV’s wars ever did.  Our MMT anti-hero John Law fled to Brussels before the end of 1720.  If he had stayed in France, the impoverished French people would have killed him for his ill-advised money printing scheme.  Law spent the rest of his life gambling his way around Europe, eventually dying flat broke in Venice in 1729.

Now a lot of MMT adherents might argue that John Law’s initial foray into MMT didn’t count because he omitted one very important step.  When inflation starts to rise, the government needs to raise taxes to remove money from the economy.

However, this objection ignores human nature.  Any inflationist monetary policy naturally creates its own constituency over time.  These special interest groups benefit from the money printing and don’t want to see it stop.  And they invariably gain political power as well; wherever wealth flows, pandering politicians looking for campaign donations aren’t far behind.

This is MMT’s fatal flaw.  It is easy to start printing money, but almost impossible to stop printing it due to political pressure.  The United States is already riddled with powerful special interests such as the military-industrial complex, higher education lobby, leviathan banking system and technology oligopoly.  The idea that we could casually indulge in Modern Monetary Theory only to restrain ourselves at some future date is pure fantasy.

Still want more proof?  How about another historical example?

In the early 1930s, Japan was struggling with the economic effects of the Great Depression.  In comes its MMT-like savior, Korekiyo Takahashi.  As the head of the Bank of Japan, Takahashi directed the central bank to purchase Japanese government debt in effectively unlimited quantities, thus allowing the government to deficit spend with abandon.  This is more or less what Modern Monetary Theory prescribes (albeit without the intermediary step of issuing government debt).

In any case, the outcome was eerily similar to John Law’s experience two centuries before.  At first the economy boomed and everything seemed wonderful.  Then, like a good central banker, Takahashi sought to turn off the printing presses now that the economy was humming along.

But a group of ultra-nationalist military officers would not have it.  They organized a coup that assassinated the central banker as he lay asleep in his bed on February 26, 1936.  This is important because the Japanese military was benefiting from Takahashi’s money printing.  When Takahashi tried to turn off the money spigot, he was killed.  Needless to say, the Japanese money spigot remained open, thus paving the way for World War II in the Pacific.

Now even though I think MMT is a terrible idea, it doesn’t mean that I don’t think it won’t happen anyway.  On the contrary, most developed nations are running excessively high budget deficits right now, while the global economy is still nominally expanding.  Once the next recession hits, the cries to fire up the monetary printing press will become too loud to ignore.  And it might simply be necessary, if for no other reason than to finance the gargantuan deficits ($2 trillion plus in the U.S.) that will undoubtedly materialize during any economic slowdown.

In effect, Modern Monetary Theory will become a convenient theoretical justification for politicians and central bankers to do what they intended to do all along: spend more money!

Now, maybe you don’t care about MMT or don’t believe that it will impact you directly.  But let me paraphrase the famous Soviet Marxist Leon Trotsky, “You might not be interested in Modern Monetary Theory, but MMT is very interested in you.”

If MMT ever comes to pass, it will destroy confidence in the U.S. dollar – slowly at first and then with stunning speed.  And the securities markets will not be far behind, either.  The stocks, bonds and mutual funds in your retirement account will not help you avoid financial ruin.

The only true defense against Modern Monetary theory is the ownership of hard assets.  I favor portable, high value density items like fine art, bullion, antiques and gemstones.  These treasures cannot be summarily printed at the whim of a venal central banker or politician.  Happily, the Antique Sage website is all about investing in antiques and other hard assets.

We would do well to realize the historical danger of trying to solve our economic problems via the printing press.  But I suspect this is one mistake humanity is doomed to repeat again and again.

 

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Signed Antique Japanese Tsuka with Bat Theme

Signed Antique Japanese Tsuka with Bat Theme
Photo Credit: matsu-kaze-japan

Signed Antique Japanese Tsuka with Bat Theme

Buy It Now Price: $565 (price as of 2019; item no longer available)

Pros:

-This fantastic Edo era Japanese tsuka, or samurai sword handle, features a fabric-wrapped ray-skin handle, figural menuki fittings and bat-themed fuchi and kashira mountings.

-This antique Japanese tsuka measures a healthy 178 mm (7.0 inches) long, meaning that it once held a full-size katana blade.

-This piece undoubtedly dates to no later than the end of the Tokugawa shogunate, circa 1868.  And, in all probability, it was made well before then.

-Bats were generally regarded as a good luck symbol in pre-modern Japan.

-This samurai sword handle has a highly desirable full-wrap ray-skin with emperor nodes visible.  The ray-skin’s seam can be seen on the ura (back) side.

-This antique Japanese tsuka is signed “Naoharu” by its creator!  The best known samurai tsuba master by this name was the legendary Yanagawa Naoharu, who worked in the late 1700s and early 1800s.  However, I suspect the maker of this piece was a different Naoharu.  Nevertheless, a signed Japanese tsuka is much more desirable than an unsigned piece.

-The fittings on this antique tsuka are made from high quality metals: shibuichi, silver and gold.  Shibuichi, a traditional alloy of copper and silver, was very popular with Japanese metalsmiths in the 18th and 19th century.  You can read up more about antique samurai sword fittings in my well-researched article on the topic.

-I love the foreboding Gothic overtones of this Far Eastern treasure.  If Dracula were a samurai, this is definitely the kind of sword handle that he would use!

-The workmanship on this piece is absolutely superb, bordering on museum quality.  I’m amazed it is available for only $565.  Regardless of whether you are a samurai sword enthusiast, an antique investor, or just a collector of Japanese curiosities, this prize is easily worth every penny of the asking price.

 

Cons:

-This antique Japanese sword handle has a slight bump on the unadorned side of its fuchi (which is not visible in the photo above).  A fuchi is the narrow metal collar that sits between the top of the sword handle and the sword guard, or tsuba (which is not present in this piece).  However, this is a minor defect for such a magnificent specimen.

 

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